Date: 20/08/2009

Source: Democratic Alliance

Title: DA: George: Speech by the DA MP on economic development

Thank you, speaker.

A rescue plan in response to the international economic crisis implies the need for an immediate response to an immediate threat. Government did not respond immediately, nor was its response aimed at the immediate concerns arising from the economic downturn.

There is a fundamental difference between structural determinants and cyclical changes; a conceptual divide that government would do well to understand. Structural problems require long term policy solutions, while cyclical issues require action in the short term. This difference should inform the approach that we need to take in determining our response to the crisis.

The global economic downturn is a cyclical phenomenon where financial markets stopped functioning as they should, due to a shortage of liquidity. It was a monetary crisis requiring an immediate monetary solution. That is why governments intervened to act as the bank of last resort and thereafter introduced stimulus packages in an attempt, in the short run, to smooth the worst of this very severe downward phase of the economic cycle.

What is our government doing? The Minister mentions a list of activities that government plans to implement. Our government is focusing on structural problems, which it should have tackled a long time ago, rather than addressing the immediate cyclical issues.

A year ago, the International Panel on Growth presented its findings on the structural problems in our economy. Their keys findings were that very few South Africans are working; the less skilled need to be absorbed into the economy and the binding constraints on the speed limit of our economy need to be relaxed.

These problems require our attention, but it not the place of a temporary rescue plan to try and address deep seated problems in our economy. These problems can be resolved through systematic structural changes such as a liberalised labour market that will encourage job creation; scrapping the ineffective SETA system in favour of an effective apprenticeship system; and trade policy that accommodates small and large exporters.

If these structural problems are not addressed by adequate structural changes, then our economy will not be able to take full advantage of the next upward phase of the business cycle. Resolving these structural problems will take time even if government commits itself to action. But this will not resolve the cyclical problem that we have now.

South Africa is no exception where many businesses cannot draw credit to invest and pay their own suppliers, forcing them to close down and retrench workers. Keeping economic activity alive through this cycle will retain jobs. Business enterprises need access to appropriate credit facilities that they cannot obtain from conventional sources. If the government had responded quickly, South Africa would not have seen the amount of job losses experienced thus far.

Across the world, unions and business are making agreements on how best to keep people in jobs. We need to have these conversations in South Africa, and government needs to make the environment easier to do this.

Government needs to respond now by taking resolute action on the immediate threats to our economy and, in this way, demonstrate that it is willing and able to perform its role as facilitator of economic activity.